Intermediate Accounting, Student Value Edition (2nd Edition)
2nd Edition
ISBN: 9780134732145
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 21, Problem 21.2P
a.
To determine
J&S Arnez’s net income.
b.
To determine
The cumulative effect on retained earnings from the change in accounting method from weighted average to FIFO.
c.
To determine
To prepare: Comparative income statement of J&S under FIFO method.
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Second Thought Products (STP) began operations on January 1, 2021, and adopted the FIFO method of inventory valuation at that time. Management elected to change its inventory method to
the average-cost method effective January 1, 2024. The new method more fairly presents the company's financial position and results of operations. The following information is available for the
years ended December 31, 2021, through December 31, 2024. STP is subject to a 40% income tax rate. The company still uses the FIFO method for income tax reporting.
(Click the icon to view the income information for both methods.)
Read the requirements.
Requirement a. Compute the cumulative effect, net of tax, for the 3-year period needed to record a change from the FIFO method to the average-cost method. (Use a minus sign or
parentheses for any decreases in income.)
Cost of Goods Sold Under
Change in Cost
Change in Cost
Cumulative Change
Average-Cost
of Goods Sold
Year
Method
FIFO Method
Pre-Tax
of Goods Sold
Net…
FTC Company had used the FIFO method of inventory valuation since it began operations in 2016. The entity decided to
change to the weighted average method for measuring inventory at the beginning of 2019. The income tax rate is 30%.
The following schedule shows year-end inventory balances:
Year FIFO
Weighted Average
2016
P4,500,000
P5,400,000
2017
7,800,000
7,100,000
2018
8,300,000
7,800,000
What amount should be reported for 2019 as the cumulative effect of the change in accounting policy?
(A P500,000 decrease in retained earnings
B P350,000 increase in retained earnings
(C P350,000 decrease in retained earnings
D P500,000 increase in retained earnings
Swifty Company began operations on January 1, 2023, and uses the average-cost method of pricing inventory. Management is
contemplating a change in inventory methods for 2026. The following information is available for the years 2023-2025.
2023
2024
2025
(Ignore all tax effects.)
(a)
Net Income Computed Using
FIFO Method
$19,170
20.980
25.060
Average-Cost Method
$15.900
17,880
20,180
LIFO Method
$12.110
Account Titles and Explanation
13.990
17,120
Prepare the journal entry necessary to record a change from the average-cost method to the FIFO method in 2026. (Credit account
titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the
account titles and enter O for the amounts. List debit entry before credit entry.)
Debit
Credit
Chapter 21 Solutions
Intermediate Accounting, Student Value Edition (2nd Edition)
Ch. 21 - Are accounting changes permitted in financial...Ch. 21 - How do firms report accounting changes under the...Ch. 21 - Prob. 21.3QCh. 21 - How do firms account for changes in accounting...Ch. 21 - Prob. 21.5QCh. 21 - Prob. 21.6QCh. 21 - Prob. 21.7QCh. 21 - Prob. 21.8QCh. 21 - Do accounting errors that self-correct within two...Ch. 21 - Does a firm need to correct an error that...
Ch. 21 - Prob. 21.1MCCh. 21 - Prob. 21.2MCCh. 21 - Prob. 21.3MCCh. 21 - Prob. 21.4MCCh. 21 - Prob. 21.5MCCh. 21 - Prob. 21.1BECh. 21 - Prob. 21.2BECh. 21 - Prob. 21.3BECh. 21 - Prob. 21.4BECh. 21 - Change in Accounting Principle, Long-Term...Ch. 21 - Prob. 21.6BECh. 21 - Prob. 21.7BECh. 21 - Prob. 21.8BECh. 21 - Prob. 21.9BECh. 21 - Prob. 21.10BECh. 21 - Prob. 21.11BECh. 21 - Prob. 21.12BECh. 21 - Prob. 21.13BECh. 21 - Prob. 21.14BECh. 21 - Change in Accounting Principle, Inventory. Massi...Ch. 21 - Change in Accounting Principle, Long-Term...Ch. 21 - Prob. 21.3ECh. 21 - Change in Accounting Principle, Inventory. Winthur...Ch. 21 - Prob. 21.5ECh. 21 - Prob. 21.6ECh. 21 - Error Analysis and Correction. Feinstein and...Ch. 21 - Prob. 21.8ECh. 21 - Prob. 21.9ECh. 21 - Prob. 21.10ECh. 21 - Change in Accounting Principle, Inventory. Second...Ch. 21 - Prob. 21.2PCh. 21 - Prob. 21.3PCh. 21 - Prob. 21.4PCh. 21 - Prob. 21.5PCh. 21 - Change in Estimate, Inventory, Bad Debt Expense....Ch. 21 - Prob. 21.7PCh. 21 - Cases Judgment Case Judgment Case: Materiality and...Ch. 21 - Prob. 1FSCCh. 21 - Surfing the Standards: Change in Accounting...Ch. 21 - Prob. 1BCC
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